JCPenney narrows loss, sales unexpectedly fall

Plano, Texas-– Amid restrained consumer spending and warmer weather that dulled sales of seasonal merchandise, JCPenney Co. Inc. managed to shrink its third quarter net loss more than Wall Street expected in the third quarter of fiscal 2014, but missed projections with weaker-than-expected net sales.



Penney reported a net loss of $188 million, narrowed from $489 million the same period a year earlier and significantly smaller than analysts had forecast. The results are considered a weighty step in the right direction by industry watchers and Wall Street analysts.



Third-quarter revenue slipped 0.5% to $2.76 billion, from $2.78 billion last year. Consensus estimates had pegged Penney for a small increase. Same-store sales were flat. CEO Mike Ullman, who has steered a mostly successful turnaround since his return at the helm in April 2013, cited improvements in gross margin and earnings before interest, taxes, depreciation and amoritization (EBITDA) as helping his company’s profit performance.



"This quarter shows the progress we are making in the final phase of JCPenney’s turnaround,” said Ullman. “We continued to significantly improve the profitability of our business with gross margin expansion of 710 basis points, a $342 million improvement in EBITDA and bottom-line financial results that exceeded even our own expectations. Like most retailers, following a strong start to the back-to-school season, sales did slow in September and October as unseasonably warm weather hindered the sale of fall goods.”



Home and fine jewelry were among the top-performing merchandise divisions for the quarter and, geographically, the retailer said the West and Northwest were the strongest.



Looking ahead, JCPenney expects same-store sales to increase 2-4% in the fourth quarter of 2014 and 3.5-4.5% in the full year 2014. In August 2015, Ullman’s successor – Marvin Ellison, formerly a Home Depot exec – will take the reins and continue the turnaround efforts.